Thousands of homeowners with tracker mortgages will be paying no interest if the Bank of England cuts borrowing costs to their lowest level ever tomorrow. Others will be paying just a nominal sum for their home loan compared with last summer if the Bank, as is widely predicted, slashes rates from 1.5% to 1%.

Many will still benefit from any cut, with an estimated 4 million people on tracker mortgage deals likely to see another sharp fall in their monthly payments.

It has been claimed that some mortgage customers could end up being owed money by their bank because they are on deals where their rate is set to sink below 0% into "negative interest" territory but the Financial Services Authority (FSA) yesterday appeared to dash hopes that these people will be entitled to an interest payment from their lender.

The most fortunate homeowners are those whose deals track below the Bank's base rate. The luckiest of all are the 1,500 people who took out a Cheltenham & Gloucester tracker mortgage in the summer of 2007, where the rate paid was set at 1.01 percentage points below base rate. Ray Boulger, of the mortgage broker John Charcol, said in theory these people would be owed money if the base rate was cut to 1%. However, C&G said it would not let the rate fall below 0%, and insisted that interest was only payable by the customer.

C&G's systems do not yet recognise a 0% interest rate, and as a result any tracker customer whose rate falls to 0% will, "as a temporary measure", be charged a nominal rate of 0.001%, or 8p a month for those with a £100,000 interest-only mortgage.

The FSA said: "We have looked at some [contracts] and our judgment is that the obligation of paying interest is a one-way obligation. Interest is paid by borrowers to lenders. It doesn't get to the point where a lender has to pay 'interest' to a borrower. Once it has reached [zero], a borrower can't change his status to being a lender, and vice-versa." The spokesman said a borrower was "always a borrower" and paid interest, though the amount of interest paid might be very low.

Gill Greenwell, a lawyer who has worked in the financial services industry drawing up product contracts, said: "The terms and conditions are written for the lender, not the consumer. They entitle the lender to charge interest on a loan. I think you would actually have to have something written into the terms and conditions to give the borrower the right to charge interest. Whether you could imply that [from the existing contract] would be a very interesting but hard argument to run."

Most people would expect someone who advises on mortgages to have picked a good home loan deal for themselves, and Elliot Nathan fits that bill: he works for John Charcol and has a Co-operative Bank interest-only tracker mortgage, on which he pays base rate minus 0.66% for two years. That means his rate could fall to 0.34% tomorrow, which would slash his monthly bill to £63. Five months ago, Nathan's monthly payment stood at £790, demonstrating just how far, and fast, interest rates have fallen.

Nathan, 35, who lives in Elstree, Hertfordshire, said he phoned his lender to ask what would happen if the base rate kept falling and he ended up in negative interest territory. "They told me it will be capped at zero," he said. The bank's terms apparently allow it to cap the mortgage in extreme circumstances.

• Unsure whether to keep your fixed-rate mortgage or move to a cheaper deal? Our calculator will show you what rate you need to achieve to make a switch worthwhile. www.theguardian.com/money